Why the Bitcoin Crash Below $500?

Bitcoin crashed below $500 during opening of the Asian trading session this morning.


This is the first time since early February, during the death throes of Mt.Gox, that price action has seen these levels.

Looking for the reason why this relentless sell-off is happening, CCN brings you this incisive and original analysis, first:

People’s Bank of China

Although the PBoC pervasive ban of Bitcoin is rumored to be a rumor, the strong sell-off this morning coincided with market opening in East Asia and would seem to confirm that the market desperately fears that PBoC is about to voice strong rhetoric against the status of Bitcoin in Mainland China.

This Bitcoin crash is apparently flying in the face of the market adage that says:

“Buy the Rumor, Sell the News”

Bitcoin PBoC Wang Qishan

Wang Qishan being coached by Barak Obama

It seems that some traders have accepted the rumor of a PBoC ban as a given fact and are dumping in anticipation of a strong Chinese Bitcoin sell-off in the coming weeks. Or the majority of traders are all too aware that this is unconfirmed rumor and are buying on each lower low. Hence we see price descending in a stairstep fashion – being tugged between the fear of an imminent sell-off, on the one hand, and opportunistic buying (in case this is a rumor) on the other.

The important thing to bear in mind with market rumors is that they consistently instill fear, because as market wisdom has it, the human mind is prone to negativity and panic in the face of uncertainty. As is the case with all markets, so it is with BTC, especially with its ever-present and looming Axe of Regulation. Increasing the downward pressure on price, is the recent spate of exchange misfortunes – add these renewed regulatory uncertainties – and the jittery public consciousness is all the more understandable.

As discussed below, there is an uncanny timing to the PBoC rumour following so closely on the heels of the US Inland Revenue Service decree on the status of Bitcoin.

Update 06h32 UTC

Moments ago The Register published “Bitcoin Bloodbath as China shutters all trading sites” based on the same Caixin article linked below. Shameless sensationalism based on zero evidence.

Update 02h40 UTC

A translation of the Chinese newspaper Caixin article is made available in English and seems to confirm the rumor, yet fails to quote any official PBoC statement to corroborate the drama.

Update 02h27 UTC

reddit bitcoin huobi PBoC rumour

They didn’t? They will! When? Aw, shucks..!

Japanese Economic Data

CPI and Unemployment figures for Japan were released at market open this morning – and cooked to perfection, no doubt:

Japan economic data 28 Mar 2014

Japanese Economic Data courtesy of http://forexfactory.com

Tokyo and National Consumer Price Index figures both confirmed continuing re-inflation of the Japanese economy, which has spent the better part of two decades in a crippling deflationary spiral. Prime Minister Shinzo Abe’s controversial “Abe-nomics” strategy seeks to boost inflation via massive devaluation of the Yen, as well as tax incentives for manufacturers to export against the weaker (and therefore advantageous) Yen.

It may very well be that the prospect of improving economic conditions has swung traders’ sentiment toward Nikkei and Forex trades – leading to closure of positions held in speculative Bitcoin trades – and hence more downward pressure on the BTCUSD price.

US Inland Revenue Service

bitcoin accepted hereHere’s how Bloomberg broke the news: You go out to buy coffee. The cafe accepts bitcoin and you gladly pay the $2 bill with bitcoin. If you’re a US citizen, and you bought that bitcoin when price was at $250, you now owe the IRS $1 in Capital Gains tax. Not Happy Sell bitcoin Holdings Now.

In fact, a proper review of the US IRS publication document reveals that the ruling is only applicable to purchases in excess of $600. Well, thanks a lot Bloomberg… Then again, many useful things are payable in bitcoin, and cost more than $600. Capital Gains Tax on $600 is a lot more than CGT on $2… Not Happy Sell Bitcoin Holdings Now!

source: http://www.cryptocoinsnews.com/2014/03/28/bitcoin-crash-500/

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Bitcoin Markets Continue to Slide on PBOC News

As usual confusion is surrounding the most recent news out of China.


Early Thursday it was reported by multiple media outlets that the PBOC had ordered banks to close the accounts of virtual currency exchanges. At first many thought the news was just another false rumor for the purpose of depressing the market to allow a cheap buy in. It appears, however, that the reports may have been correct (including those at CryptoCoinsNews) and that Chinese domestic banks may no longer do business with websites that trade in digital currencies. According to the reports the PBOC will require the banking accounts of the various Chinese virtual money exchanges to be closed by April 15. The news was mostly discounted at first with Reddit bloggers calling it FUD and markets reacting reluctantly. However, the Wall Street Journal is also reporting this story with quotes from Bobby Lee, Chief Executive Officer of BTC China.

It is also important to note that the story has been reported as fact by the Chinese news media, including by the online business news service Caixin. The Wall Street Journal Reported that Bobby Lee, Chief Executive Officer of BTC China had stated that he had not seen the document but is concerned the reports could be true. When Bobby Lee was asked if customers would no longer be able to use banks to deposit funds he said:

“If the rumor turns out to be true, that’s what’s going to happen.”

He continued:

“At this time it’s too early for me to elaborate on what steps we will take, …We will take it one day at time.”

Though banks may no longer be able to deal directly with exchanges, it may be possible for customers to make deposits directly. Perhaps this is the reason the markets did not react with extreme price drops as seen in early December when the PBOC issued similar statements saying that banks could no longer engage in Bitcoin business. If customers are allowed to make deposits directly into the exchanges, it may represent more of an inconvenience than an actual halt to the trading. In any case, relatively speaking, the Chinese markets so far have not reacted with the same quick and dramatic price falls as previously with PBOC news. Possibly some of this has been priced in as the rumors have already been circulating.

PBOC issues new statement on exchanges

Prices slide after PBOC issues new statement on exchanges

As of the writing of this story, Bitcoin Markets are down 21% from 592 to 470. (Price was falling during the writing of this article) This fall compares to the early December drop of over 50%. Of note is the fact that, in early December, we were coming off the highs and now much of these negative news stories have already been priced into the market. It will be interesting to see how the Chinese markets continue to react to this news that cannot be positive for trading there. It should be noted that the Chinese markets are, in fact, quite important for Bitcoin so we will not see US markets reacting much better. In particular Litecoin is heavily traded on the Chinese markets.

In writing this article, it was clear that many bloggers and online commenter s seem to criticize the Chinese for the actions of their central bank. In fact, it is important to realize that many Chinese yearn for the freedom that virtual currencies represent while many in the West easily fall for Banker sponsored FUD. For example, as if the recent IRS ruling is some empirical finding, the Bloomberg article on this story repeatedly refers to Bitcoin as a commodity. More than likely the Bloomberg article represents a continued inability of mainstream journalists to understand the Bitcoin protocol and what it is about. In reality Bitcoin has many superior qualities as a transactional currency and does not do so well as a commodity. This is because its value depends so heavily on what the state might do to restrict its use, as this story is evidence of.

It is clear that the PBOC is intent on controlling Bitcoin. It will be interesting to see to what lengths they will go to in order to achieve this. Many people in China mine Bitcoin for a profit and sell and build Bitcoin mining equipment. The actions of the PBOC have cost Chinese investors a lot of money. Will the PBOC out of its own monetary interests continue to punish so many profitable enterprises?

source: http://www.cryptocoinsnews.com/2014/03/28/bitcoin-markets-continue-slide-pboc-news/

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Today in Gox: Police on the Case

Mt. Gox rose again today to announce it is now working with Japanese police to investigate what happened to the bitcoins it lost, misplaced, or had stolen by hackers.


The statement, posted on the homepage on letterhead bearing CEO Mark Karpeles’ name, said:

Following its application for commencement of civil rehabilitation, MtGox Co., Ltd. consulted with the metropolitan police department with regard to the disappearance of bitcoins which is one of the causes for said application. MtGox Co., Ltd. hereby announces that it has submitted necessary electronic records and other related documents.

MtGox Co., Ltd. intends to fully cooperate with each competent authority. Further, MtGox Co., Ltd. continues to make efforts to clarify facts as quickly as possible and to recover from damages.

The announcement is carefully worded, not mentioning whether Mt. Gox chose to consult with the police, whether the police came to Mt. Gox, or if it was just a routine matter as part of the civil rehabilitation process. According to a report by Reuters, the police do not intend to make any further statement on the matter.

Other than knowing the authorities are involved somehow, and the words “recover from damages” at the end, the update probably does little to comfort those who lost large sums of money when Mt. Gox declared bankruptcy nearly a month ago.

Rumor file

Another tiny ray of hope today came in the form of a tweet by Eren Canarslan, an investment banker from Turkey:

Within a few days(or hours) @MtGox will announce that “they found ~670.000 #bitcoin & may release some BTCs to the victims. @PatronaPartners

— Eren Canarslan (@CanarslanEren) March 25, 2014

The one-off tweet, followed by nearly a whole day of radio silence (that as of press time still hadn’t been broken) probably would have been written off as trolling or wishful thinking had it not been for these two other cryptic tweets he’d posted on 4th and 5th March:

@PatronaPartners As I heard from an insider from @blockchain: they found lost #bitcoin of @mtgox Note: It’s not an investment advice/offer.

— Eren Canarslan (@CanarslanEren) March 4, 2014

@zeroblock @PatronaPartners @blockchain I talked with Mark Karpeles, the news is good !

— Eren Canarslan (@CanarslanEren) March 5, 2014

Within two weeks, Mt. Gox announced it had discovered 200,000 BTC in an ‘old format’ wallet. In the world of lost bitcoins, this has bestowed a kind of prophetic status on Eren Canarslan, whose bitcoin-associated follower count increased markedly over the day.

It has not yet been established what his connection is to Mark Karpeles, Blockchain, or any insider information. The 4th March post drew a bemused response from ZeroBlock, Blockchain’s subsidiary.

It has also raised interest in the company he was supposedly tweeting to, Hong Kong’s Patrona Partners. That company responded by tweeting “Only thing I know he is not trolling,” with a link to an image of Canarslan’s earlier post.

We await, like a flock of seagulls around a small child, the next morsel either Mt. Gox or its claimed ‘insiders’ toss in our direction.

source: http://www.coindesk.com/today-gox-police-case-coin-rumors/

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